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Technology choice and efficiency on Australian dairy farms

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Author Info

  • Kompas, Tom
  • Che, Tuong Nhu

Abstract

Deregulation of the Australian dairy industry, specifically the removal of price subsidies to ‘market milk’, as well as ongoing drought in many dairy regions, has placed considerable pressure on farm cash income and a search for ways in which dairy farms can be made to operate more efficiently. Using traditional farm survey data and a unique biannual data set on farm technology use, this paper estimates a stochastic production frontier and technical efficiency model for dairy farms in New South Wales and Victoria, determining the relative importance of each input in dairy production, the effects of key technology variables on farm efficiency, and overall farm profiles based on the efficiency rankings of dairy producers. Results show that production exhibits constant returns to scale and although feed concentration and the number of cows milked at peak season matter, the key determinants of differences in dairy farm efficiency are the type of dairy shed used and the proportion of irrigated farm area. Overall farm profiles indicate that those in the ‘high efficiency group’ largely employ either rotary or swing-over dairy shed technology and have almost three times the proportional amount of land under irrigation.

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File URL: http://purl.umn.edu/116921
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Bibliographic Info

Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 50 (2006)
Issue (Month): 1 (March)
Pages:

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Handle: RePEc:ags:aareaj:116921

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Related research

Keywords: Australian dairy farms; dairy production and efficiency; dairy technology; stochastic production frontier; Livestock Production/Industries;

References

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  1. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
  2. Kumbhakar, Subal C & Biswas, Basudeb & Bailey, DeeVon, 1989. "A Study of Economic Efficiency of Utah Dairy Farmers: A System Approach," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 595-604, November.
  3. Loyland, Knut & Ringstad, Vidar, 2000. "Gains and structural effects of exploiting scale-economies in Norwegian dairy production," Agricultural Economics, Blackwell, vol. 24(2), pages 149-166, January.
  4. Kompas, Tom & Che, Tuong Nhu, 2004. "Productivity in the Australian Dairy Industry," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 12.
  5. repec:ags:auagre:126559 is not listed on IDEAS
  6. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  7. Kalirajan, K P & Obwona, M B, 1994. "Frontier Production Function: The Stochastic Coefficients Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(1), pages 87-96, February.
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Citations

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Cited by:
  1. Graham, Mary, 2008. "Biophysical Modelling and Performance Measurement," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6773, Australian Agricultural and Resource Economics Society.
  2. Tsimpo Nkengne, Clarence, 2010. "Technical Efficiency and Optimal Farm Size in the Tajik's Cotton Sector," MPRA Paper 35192, University Library of Munich, Germany.
  3. Jiang, Nan & Sharp, Basil, 2013. "Cost Efficiency of Dairy Farming in New Zealand: a stochastic frontier analysis," 2013 Conference, August 28-30, 2013, Christchurch, New Zealand 160266, New Zealand Agricultural and Resource Economics Society.
  4. del Corral, Julio & Alvarez, Antonio & Tauer, Loren W., 2009. "Detecting Technological Heterogeneity in New York Dairy Farms," Working Papers 51143, Cornell University, Department of Applied Economics and Management.
  5. Moreira, Victor H. & Bravo-Ureta, Boris E. & Dunner, Roberto & Vidal, Ricardo, 2012. "Total Factor Productivity Change in Dairy Production in Southern Chile: Is Farm Size Significant?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126895, International Association of Agricultural Economists.
  6. D’Antoni, Jeremy M. & Mishra, Ashok K. & Blayney, Donald, 2013. "Assessing participation in the Milk Income Loss Contract program and its impact on milk production," Journal of Policy Modeling, Elsevier, vol. 35(2), pages 243-254.
  7. Mary Graham, 2008. "Developing a Social Perspective to Farm Performance Analysis," Economics Series 2008_17, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  8. Tanira T. Kingi & Tom F. Kompas, 2005. "Communal Land Ownership and Agricultural Development: Overcoming Technical Efficiency Constraints Among Fiji’s Indigenous Sugercane Growers," International and Development Economics Working Papers idec05-11, International and Development Economics.
  9. Karanja, Francis & Gilmour, Daniel & Fraser, Iain, 2012. "Dairy productivity growth, efficiency change and technological progress in Victoria," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 125053, Australian Agricultural and Resource Economics Society.
  10. Sauer, Johannes & Graversen, Jesper T. & Park, Timothy A., 2006. "Breathtaking or Stagnating? - Productivity, Technical Change and Structural Dynamics in Danish Organic Farming," 2006 Annual meeting, July 23-26, Long Beach, CA 21481, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  11. Alvarez, Antonio & del Corral, Julio & Tauer, Loren W., 2012. "Modeling Unobserved Heterogeneity in New York Dairy Farms: One-Stage versus Two-Stage Models," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(3), December.
  12. Solis, Daniel & Bravo-Ureta, Boris E. & Quiroga, Ricardo E., 2007. "Soil conservation and technical efficiency among hillside farmers in Central America: a switching regression model," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(4), December.

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